Correlation Between Thantawan Industry and POSCO Thainox

Can any of the company-specific risk be diversified away by investing in both Thantawan Industry and POSCO Thainox at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Thantawan Industry and POSCO Thainox into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thantawan Industry Public and POSCO Thainox Public, you can compare the effects of market volatilities on Thantawan Industry and POSCO Thainox and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Thantawan Industry with a short position of POSCO Thainox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thantawan Industry and POSCO Thainox.

Diversification Opportunities for Thantawan Industry and POSCO Thainox

0.54

Correlation Coefficient

Thantawan Industry  POSCO Thainox

Very weak diversification

The 3 months correlation between Thantawan and POSCO is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Thantawan Industry Public and POSCO Thainox Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Thainox Public and Thantawan Industry is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Thantawan Industry Public are associated (or correlated) with POSCO Thainox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Thainox Public has no effect on the direction of Thantawan Industry i.e., Thantawan Industry and POSCO Thainox go up and down completely randomly.

Pair Corralation between Thantawan Industry and POSCO Thainox

Assuming the 90 days trading horizon Thantawan Industry Public is expected to generate 0.44 times more return on investment than POSCO Thainox. However, Thantawan Industry Public is 2.28 times less risky than POSCO Thainox. It trades about -0.05 of its potential returns per unit of risk. POSCO Thainox Public is currently generating about -0.21 per unit of risk. If you would invest  2,925  in Thantawan Industry Public on September 13, 2024 and sell it today you would lose (25.00) from holding Thantawan Industry Public or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Thantawan Industry Public  vs.  POSCO Thainox Public

Thantawan Industry Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thantawan Industry Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Thantawan Industry is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

POSCO Thainox Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO Thainox Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Thantawan Industry and POSCO Thainox

The main advantage of trading using opposite Thantawan Industry and POSCO Thainox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thantawan Industry position performs unexpectedly, POSCO Thainox can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in POSCO Thainox will offset losses from the drop in POSCO Thainox's long position.

The idea behind Thantawan Industry Public and POSCO Thainox Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.